Where There’s an Implied Contract, There’s a Potential Bid Protest: Court of Federal Claims Has Jurisdiction to Hear Breach of Implied Contract Claims

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Snell & WilmerA recent U.S. Court of Appeals for the Federal Circuit (Federal Circuit) decision provides unsuccessful government contractors yet another avenue to pursue a bid protest. Notably, the Federal Circuit resolved the looming question of whether the U.S. Court of Federal Claims (COFC) has jurisdiction over claims asserting the government breached an implied-in-fact contract during the procurement context: it does. This new development provides another arrow for the unsuccessful bidder’s quiver to address procurement matters and companies doing business with the government should consider such issues in dealing with federal government agencies.

Previously, the Federal Circuit found that the COFC has jurisdiction under 28 U.S.C. § 1491(a) over implied-in-fact contracts only arising outside of the procurement context. In Safeguard Base Operations LLC v. United States, the Federal Circuit now has found the COFC has jurisdiction over implied-in-fact contract claims arising during the procurement context. Additionally, the Federal Circuit established that the Administrative Procedure Act (APA) is the appropriate standard of review for such issues, specifically whether the government’s decision was arbitrary, capricious, an abuse of discretion, or contrary to law.

In Safeguard, the government contractor filed a bid protest challenging the Department of Homeland Security’s (DHS) award of a multi-year contract for dorm management services to a competitor. The government contractor protested unsuccessfully, at both the Government Accountability Office (GAO) and then at the COFC. It alleged that DHS did not fairly and honestly consider their proposal, thereby breaching an implied-in-fact contract to fairly and honestly consider their proposal. The Federal Circuit found that DHS properly assessed the contractor’s bid each time it found that the contractor had not met the solicitation’s terms. Although the Federal Circuit ultimately determined the DHS had not breached the implied-in-fact contract, it established COFC has jurisdiction to hear such claims regarding the procurement context and the APA standard of review for such claims.

Government contractors now may consider an alternative pathway to challenge unsuccessful bids and obtain relief, even if their protest fails before the GAO. Circumstances in which a breach of implied-in-fact contract might occur include: (1) an agency improperly favoring a competitor’s proposal, (2) the agency’s failure to fairly and honestly consider the offeror’s proposal, or (2) an agency engages in conduct that prejudices the contractor by treating its proposal differently than the proposals of others. Although COFC can consider these claims, Safeguard does not preclude COFC from dismissing such claims on jurisdictional grounds. As such, this is only one arrow that unsuccessful bidders may want to consider, in addition to, among others, unequal treatment, bias, conflicts of interest, responsiveness, and responsibility. Moreover, Safeguard is also an example of the need to follow bid instructions and to amend bids when factors that could impact the success of a bid come to light in later question and answer documents. It also reflects the importance of the Question and Answer period related to solicitations. Bid protests move very quickly. As such, preparing for a bid protest (either attacking or defending the award) as a part of the solicitation process may provide a foundation for success.

Footnotes:

  1. No. 2019-2261, 2021 WL 821472 (Fed. Cir. Mar. 4, 2021).
  2. Id. at *11.
  3. Id. (citing 28 U.S.C. § 1491(b)(4) (incorporating the APA standard set forth in 5 U.S.C. § 706); Per Aarsleff A/S v. United States, 829 F.3d 1303, 1309 (Fed. Cir. 2016) (citations omitted)).
  4. Safeguard, at *5–8.
  5. Id. at *8.
  6. Id. at *14–17.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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